Understanding Share Secured Loans: A Simple Guide
Did you know your savings could help you qualify for a loan?
A Share Secured Loan allows you to borrow money using funds you already have deposited at Your Legacy Federal Credit Union as collateral. It’s a way to access borrowed funds without having to withdraw and spend your existing savings.
How Does a Share Secured Loan Work?
Let’s say you have $2,000 in your savings account and want to borrow $1,000.
Instead of withdrawing $1,000 from your savings, you could apply for a Share Secured Loan. If approved, the credit union places a hold on $1,000 of your savings as collateral while you make payments on the loan.
As you pay down the loan, the amount of savings being held decreases along with your remaining loan balance. Your savings stay in your account, but the funds being held aren’t available for withdrawal until they’re released.
Why Choose a Share Secured Loan?
There are several reasons this type of loan might be a good fit:
- Potentially lower interest rates. Because your savings secure the loan, you may qualify for a lower rate than you would with an unsecured loan.
- Build or establish credit. Making on-time payments can help build a positive payment history when those payments are reported to the credit bureaus.
- Keep your savings intact. Rather than spending your saved money, you can borrow against it while keeping the pledged funds on deposit.
Keep in mind that missed payments can hurt your credit, and the credit union may use pledged savings to cover unpaid loan obligations.
What About Interest Rates?
Share Secured Loan rates depend on the type of deposit account used as collateral. For current rates, terms, and eligibility requirements, visit our Share Secured Loan page.
Is a Share Secured Loan Right for You?
If you have money saved but would prefer not to spend it all at once, a Share Secured Loan may be worth considering. Our lending team can help explain your options and determine whether this type of loan fits your needs.
Learn More About Share Secured Loans. All loans are subject to credit approval. Rates and terms are subject to change.
